In the article 6 Reasons Why You Need to Carry Cash, I mentioned that only carrying around credit cards makes it a nuisance to make purchases from merchants who implement credit card minimum purchase requirements. In the comments section, multiple readers claimed that it is actually against the terms of service between credit card companies and merchants for merchants to institute minimum purchase requirements (per credit card merchant agreements). One reader, Eric, also was interested in finding out if any credit card company had pursued a case against a merchant for doing this. After doing some research, I found out some interesting information that I wanted to share with everyone.

Reasons for Instituting Minimum Purchase Requirements

The places where I have noticed minimum purchasing requirements are at local convenience stores, the cafeteria in the building that I work in, bakeries, etc. Merchants may decide to institute these for a few different reasons, such as to pass on the cost of credit card transactions to consumers (merchants have to pay hefty transaction fees to the credit card companies every time a consumer swipes a card), or to make more money from consumers who might not otherwise reach a $5 purchasing threshold. In my own experience, when I was famished in the past and looking for an afternoon snack (bag of Sunchips) in our cafeteria I’ve had to load up on candy bars, an iced tea, a banana, gum, and anything else necessary to meet the $5 credit card minimum charge — items I would not have purchased without that requirement.

Cases that Credit Card Companies Have Pursued

In an attempt to answer the Eric’s question, I spent a decent amount of time researching whether or not a credit card issuer has sued or otherwise slapped a merchant on the wrists for requiring a minimum transaction amount when using a credit card. I could not find anything (does anyone here know of any cases?).

However, as of July 2010, this no longer matters for most minimum purchase amounts.

New Law Makes Credit Card Minimum Legal

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which went into law in July 2010, there was a section that made minimum purchase requirements legal. The law states that merchants can now institute up to a $10 credit card minimum requirement, so long as they treat each card equally. A direct quote from the law states:

A payment card network shall not directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability (i) of any person to set a minimum dollar value for the acceptance by that person of credit cards…

Furthermore, the law allows the Federal Reserve to increase the minimum purchase requirements in the future.

While I was surprised to not find any cases where credit card issuers have pursued penalties or warnings against merchants who instituted minimum purchasing requirements for consumers, it does not actually matter now because of the new law. That is, as long as the minimum amount is $10 or less. As a side note, this law came into effect last year, and I was surprised about this because I have not seen more companies institute minimum purchase amounts.

Have you seen an increase in the minimum purchase requirements? Will this influence your decision about whether or not to carry around cash only, credit cards only, or a mixture of both?

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I am not a business owner and never have been and I find a minimum purchase requirement to be fair and reasonable. I like to support local businesses particularly non-chain, small mom and pop type establishments. From what I have read, I have gotten the impression that small business owners do not have a really equitable playing field anyway. (No, no one in my family here is a small business owner.)So why should they lose more money on an under $5 purchase because a consumer doesn’t want to carry cash? It is hard enough for them to compete with large chain stores importing their goods from China, etc. Just my humble opinion.

Interestingly, the Dodd-Frank Wall Street Reform and Consumer Protection Act is also responsible for banks charging fees on debit cards. BofA is the most recent, but won’t be the last… I don’t know if this act legalized minimum purchase amounts or not, but it seems not to have reformed wall street or done much to protect the consumer.

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